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Q1 2017 economic perspectives

The U.S. economy grew by a lackluster 1.6 percent for the full year 2016 – its slowest pace since 2011. While growth in the past year was a full percentage point lower than in 2015, expectations are for a pickup in the pace of growth for 2017.

Executive summary

The U.S. economy grew by a lackluster 1.6 percent for the full year 2016 – its slowest pace since 2011. While growth in the past year was a full percentage point lower than in 2015, expectations are for a pickup in the pace of growth for 2017.

Inflation increased to its highest annual pace since March 2012, as CPI increased at a 2.7 percent year-over-year rate. Higher energy prices had been the primary driver of headline inflation over the past 6 months, but its impact should prove transitory as energy prices have stabilized.

As widely expected, the Federal Reserve raised short-term interest rates in March, citing an economy near full employment and inflation trending in a territory that would support further rate hikes later this year. The Fed has indicated intentions for two more rate increases in 2017, as well as an eventual reduction of its balance sheet.

The economy added an average of 187,000 jobs per month in 2016 and continues to show progress into 2017, averaging 178,000 new jobs per month in Q1. The unemployment rate, at 4.5 percent, is at its lowest level since May 2007.